The 29-year-old joined the Black and Whites from Salford last winter and was heralded as a marquee signing by the club.
Injury and form blighted him, though, and even though he impressed in the Challenge Cup semi-final win over Warrington, he failed to fully live up to his billing.
The former Canterbury Bulldog asked to leave the KC Stadium at the end of the season for personal reasons and Hull say he has joined Cronulla, although the NRL side are yet to officially confirm it.
"Daniel has left the club and will be returning to the NRL on personal grounds," said football manager Motu Tony.
"It hasn't quite worked out for him at Hull FC and a return to an Australian club is probably an environment better suited to him personally.
"Our focus remains on 2014 and building a competitive squad with players that are fully committed to the club, their team-mates and the fans."
Despite a significant outlay on Holdsworth over the last year, it is understood the club are not disappointed to lose him as they clear the decks following a dismal end to the 2013 season.
Ambitious owner Adam Pearson was unhappy with a number of leading players in the wake of a 76-18 play-off defeat to Huddersfield, while coach Peter Gentle was sacked.
Pearson wants a big-name replacement for Holdsworth to win fans over and new new boss Lee Radford has been using the current World Cup as a live scouting exercise, while he is keen on doing a deal with free agent Ryan McGoldrick who had a short spell with the club in 2012.